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When the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) debuted just over two years ago, the fund set off a low volatility craze in the ETF arena. Today, SPLV has over $4.7 billion in assets under management. The rival iShares MSCI USA Minimum Volatility ETF (NYSEArca: USMV) has over $2.3 billion in AUM and both funds have been impressive asset gatherers in 2013.

SPLV and USMV are, predictably, focused on large-cap stocks. However, as the PowerShares DWA SmallCap Technical Leaders Portfolio (NYSEArca: DWAS) has shown investors, there are different and profitable ways of gaining exposure to small-caps via ETFs. Risk-averse investors may want to consider the PowerShares S&P SmallCap Low Volatility Portfolio (NYSEArca: XSLV). [Small-Cap ETF Smokes Russell 2000 in its First Year]

XSLV is noticeably different than DWAS, though the two funds share 10 holdings in common. Like SPLV, XSLV takes 20% of the holdings in an index, in this case the S&P SmallCap 600, with the lowest trailing 12-month volatility. The recipe has thus far been successful for XSLV even in a year that has favored risk-taking with U.S. stocks. [Why Low Volatility ETFs Remain Popular]

The upside of low volatility stocks and ETFs is that investors can still profit from broader market moves high while still obtaining some level of protection if the market swoons. Over short periods, low-volatility funds may underperform the broad indices during bull market rallies since low-volatility funds are exposed to more defensive sector picks. [PowerShares to Introduce New Low Volatility ETFs]

However, XSLV is not excessively defensive. Given the dearth of utilities names that live in small-cap territory, that sector is merely XSLV’ second-largest sector weight at 13.6%. Financials, with an allocation of 55.2%, dwarf utilities in XSLV. Industrials at 11.1% are the only other industry group to receive a double-digit weight in XSLV.

XSLV has benefited from its exposure to small-cap banks, which are typically regional and community banks. The ETF is up 14.3% year-to-date and more upside could be had if interest rates rise. Regional banks are typically more adversely affected by low interest rates than their large-cap peers. If interest rates rise in earnest, improved net interest margins could benefit over half of XSLV’s weight, in turn making the fund an unheralded rising rates play.